SAU 31 gets $1.1M loan to cover budget problems caused by faulty bookkeeping

By Nick Sambides Jr., BDN Staff
Posted Dec. 05, 2011, at 5:25 p.m.

LAGRANGE, Maine — Two SAU 31 board members resigned their leadership positions to help the school system get a $1.1 million loan from the Maine Municipal Bond Bank, but they might not have had to, the bank’s executive director said Monday.

Chairman John Neel and Vice Chairwoman Judy Coffin opted to resign their chairmanship posts during a school board meeting on Wednesday because they feared that the bank’s board of commissioners would set a change in leadership as a condition of loan approval or would reject the school system’s application, Neel said Monday. They remain board members.

“We didn’t know whether that was going to be an issue,” Neel said Monday, “but I have no problem with it [their action]. If that’s what it takes for us to get the loan, then let us move on.”

The bond bank’s commissioners voted 5-0 on Friday to grant the school system enough funding to offset a deficit created by faulty budget practices and insufficient board oversight but set several conditions, including voter approval in a special referendum, said the bond bank’s executive director, Robert O. Lenna.

But a leadership change was not among them, Lenna said.

The commissioners “had two full meetings in which they dealt with this, and the question of who is running the shop did definitely come up,” Lenna said Monday, “but that did not mean it would have been a requirement.”

The school district, which serves Burlington, Edinburg, Enfield, Howland, Maxfield and Passadumkeag, sought a $1.1 million bond to cover debt and some expenses left after the $700,000 savings created by the recent layoff of the 14 ed techs and three maintenance workers plus other cuts, Superintendent Michael Wright has said.

Wright discovered the budgeting and accounting problems shortly after his SAU 41, the former School Administrative District 41, consolidated with the former SAD 31 on July 1. A subsequent, careful review of SAU 31′s records revealed, he said, that school leaders gradually had created the deficit by projecting revenues from undesignated fund balances that never actually occurred.

Wright also learned, he said, that accounts thought to have surpluses actually carried deficits.

Some school leaders blamed administrations prior to that of retired Superintendent Jerry White and individual workers for the problems that led to the deficit, but Wright said audits showed that for several years there were failures to balance accounts, inaccurate and incomplete record-keeping and weak internal controls over financial reporting.

“Obviously, there were problems,” Lenna said, “and the board [of commissioners] wanted to understand what had happened.”

Lenna credited the school board and administration with dealing directly and earnestly with the financial miscues. Besides Wright being made superintendent and the layoffs, the school district has hired a new business manager, he said — and now has new board leadership in Chairwoman Pamela Hatch, who did not immediately return a message seeking comment on Monday.

“The district has worked hard to deal with a very difficult set of circumstances,” Lenna said. “They are clearly committed to addressing the problems.”

Bond bank officials are drafting loan conditions in a letter they hope to have delivered to the district by the end of the week, Lenna said. School leaders must set budget hearing dates and seek a special referendum.

Wright was not at work on Monday and did not return a message seeking comment.

If voters and the school board accept the five-year loan, the district will pay about 2 percent in interest, Lenna said.

http://bangordailynews.com/2011/12/05/news/penobscot/sau-31-gets-1-1m-loan-to-cover-budget-oversight-miscues/ printed on April 21, 2014